3 questions to ask before you invest more in your business
submitted by Joe Beckford
If you're an entrepreneur, your every day includes a degree of financial uncertainty. Even if your business is profitable year-after-year and has an established following, you can't mitigate the unexpected nor should you expect to. That's why it's important to find the balance between investing in your business and saving for your future. While there's no perfect formula, there are questions you should be asking:
Are All My Eggs In One Basket?
While every entrepreneurs should be optimistic about the success of their business, enthusiasm shouldn't replace sensible decision-making. Remember, your business is still an investment. A smart financial advisor will recommend a diverse investment portfolio. Similarly, they would advise you to not put every spare dollar into your business.
Finding the ratio of business investment to personal finance will depend on you and your business's stage of life. If you're single, have few financial obligations and an appetite for risk, you may be comfortable investing more in your company. However, if you're approaching retirement, you'd be wise to consider your future independent of your business's future.
Is My Business Going to Succeed?
If you're the kind of person who would start a business, you're also probably the kind of person who is optimistic even in unfavorable circumstances. Even for the pessimistic entrepreneur, it can be hard to evaluate your efforts objectively. However, if you're going to be a wise investor, you have to consider whether or not your company will succeed long-term.
This success can take different forms depending on the size and type of business you own. For example, serial entrepreneurs often plans on selling their ideas to an investor. However, a small town business owner may intend to run their establishment until they retire. Either way, if the dollars you put in now, won't yield a return in the future, it's time to invest elsewhere.
What's My Return Rate?
With other investments, you consider rate of return. That's why you choose a 401k over a bank account when saving for your future. The same thinking should apply to your business. You might be paying the bills, but that doesn't mean you should reinvest every extra dollar.
Asking and answering these questions can help you answer the bigger question – should you invest more money in your business? Decisions like this become even easier with the help of a third-party expert. An outside opinion can balance out your answers if you're having a hard time being objective. However, if you go it alone, answering those questions will help you out.
Wanting a second, third or fourth opinion on a big decision? If you're in the Atlanta area, schedule a meeting with one of our financial advisors, today.